False discoveries in style timing of Chinese mutual funds

• We employ the FDR to examine the style timing of Chinese stock mutual funds.
• Chinese funds are able to time the market.
• Chinese funds do not have size timing, value timing and momentum timing ability.
• The effect of fund characteristic on style timing is related to investment objective.
• Chinese funds can exhibit market timing skill persistence.

This paper examines the daily style timing of actively managed Chinese stock mutual funds from July 2002 through December 2013 by adopting the false discovery rate (FDR). We find evidence in favor of mutual funds being able to time the market. Our results indicate that mutual fund managers do not possess size, value or momentum-based timing skills. Concerning the relation between fund characteristics and style timing, we find that expense and turnover are positively associated with market timing and value timing but negatively associated with momentum timing, which is likely to be attributable to different investment objectives. In addition, we examine market timing skill persistence by controlling the FDR and find that Chinese stock mutual funds are able to exhibit market timing persistence.